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Public support for tax policies in COVID-19 times: Evidence from Luxembourg

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  • Javier Olivera
  • Philippe Van Kerm

Abstract

We study attitudes towards the introduction of hypothetical new taxes to finance the cost of the COVID-19 pandemic. We rely on survey data collected in Luxembourg in 2020. The survey asks for the agreement of respondents over: a one-time net wealth tax, an inheritance tax, a temporary solidarity income tax, and a temporary increase in VAT. All questions include different and randomly assigned tax attributes (tax rates and exemption amounts). We find a clear divide with relatively high support for new wealth and inheritance taxes on the one hand and a low support for increases in VAT and income taxes on the other hand. While 58% of respondents agree or strongly agree with a one-time tax levied on net worth, only 24% are in favor of a small increase in VAT. Support for any tax is however negatively associated with the size of the tax as measured by the predicted revenues. Our results indicate that a one-time wealth tax could raise substantial revenues and still garner public support.

Suggested Citation

  • Javier Olivera & Philippe Van Kerm, 2021. "Public support for tax policies in COVID-19 times: Evidence from Luxembourg," LISER Working Paper Series 2021-10, Luxembourg Institute of Socio-Economic Research (LISER).
    • Handle: RePEc:irs:cepswp:2021-10
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    1. David R. Agrawal & Aline Bütikofer, 2022. "Public finance in the era of the COVID-19 crisis," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(6), pages 1349-1372, December.

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    More about this item

    Keywords

    COVID-19; wealth tax; inheritance tax; income tax; VAT; preference for redistribution;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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